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Unsafe Insurance Company needs to forecast its personnel department costs. The following output was obtained from a regression program used to estimate the department's costs as a function of the number of employees:
Dependent variable = Personnel costs
Standard error 612.0926
Independent Variable Coefficients Error T-Statistic
Intercept 8,421.441 2,687.979 3.133
Employees 492.703 164.949 2.987
Monthly data for the past two years were used to construct these estimates. Cost relationships are
expected to be the same for the coming period.
a. What are the estimated personnel costs for 4,200 employees?
b. (Appendix A) How confident are you that a significant cost-driver relation exists?
See attached file for full problem description.
This question was answered on: Sep 16, 2020
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